RBI-Centre clash, govt reportedly upset with bank for making rift public

New Delhi: Indian government officials are very upset with the Reserve Bank of India (RBI) for publicly talking about a rift with the government, fearing it could tarnish the country’s image among investors, senior officials said.

The RBI Deputy Governor Viral Acharya warned that undermining a central bank’s independence could be “potentially catastrophic”, in an indication that it is pushing back hard against government pressure to relax its policies and reduce its powers.

In a speech to top industrialists, Acharya cited the Argentine government’s meddling in its central bank’s affairs in 2010 as an example of what can go wrong. That led to a surge in bond yields that badly hurt the South American economy.

“Governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite an economic fire, and come to rue the day they undermined an important regulatory institution,” Acharya said.

The government officials Reuters spoke to on Monday declined to be identified because of the sensitivity of the subject.

One said that it was vital that what happened between the government in New Delhi and the RBI in Mumbai was kept confidential. “The government respects the autonomy and independence of the RBI but they must understand their responsibility,” the official said.

A second official, based in Prime Minister Narendra Modi’s office, said it was “very unfortunate” that the RBI took the matters public. “The government is very upset. It was not expected from the RBI,” the official added.

An RBI spokesman was not immediately available for comments after business hours.

Government officials have recently called for the RBI to relax its lending restrictions on some banks, and New Delhi has also been trying to trim the RBI’s regulatory powers by setting up a new regulator for the country’s payments system.

The Modi administration has also been pushing the central bank to part with some of its 3.6 trillion rupees ($49 billion)surplus to help bridge the fiscal deficit and finance its welfare programmes.

The officials in New Delhi were particularly angry that Acharya launched the attack while Modi was about to head to Japan for talks with Prime Minister Shinzo Abe, the first source said.

Finance ministry officials remained largely silent in response to the speech at the weekend, as they didn’t want to aggravate the issue when Modi and top officials were in Japan, this official said.

Government officials believe that RBI Governor Urjit Patel has some responsibility for the controversy, and he cannot expect an extension of his current three-year term – which ends next September – “as his right”, one of the officials added.

Acharya had three of his fellow deputy governors in the audience and also thanked Governor Patel for his “suggestion to explore this theme for a speech”, in a show of unity from an institution typically known for its restraint.

The official in the prime minister’s office said Patel could face a tough time when he appears before a parliamentary standing committee on Nov. 12.

Top government officials said they were surprised that Patel, who was appointed by the Modi administration in 2016 and initially cooperated with New Delhi, is creating tensions when the government is facing criticism over handling of the economy before a national election, due by next May.

On Monday, a third government source said the finance ministry was worried how markets would respond to Acharya’s public comments but felt more relaxed after they rose. The gains were largely a result of a separate announcement by the RBI about an injection of liquidity through government bond buying.

Modi’s government is pushing the RBI to relax lending norms for small businesses and pump more liquidity into the market to bolster economic growth before key state elections due in the next few weeks and the general election.

It is worried that the central bank’s hawkish monetary stance and stringent regulations on lending by state banks could push economic growth below 7 per cent in the October-December quarter – the last quarter for which data would be available ahead of the general election.

“When we are facing problems on the external front like high crude oil prices, trade tensions putting pressure on our current account balance, can we afford another domestic crisis?” the third government source said.

Addressing Mahindra Samriddhi Agri awards, he said there is a need to boost investment in the agriculture sector as well as to introduce new technology and market reforms.

Kant also stressed on scrapping Agriculture Produce Marketing Committee and some old laws like Essential Commodites Act, which restrict movement of farm produces.

However, he said agriculture is a state subject and the central government has limited role in it.

“In India 50 per cent of our population is dependent on agriculture. If India’s GDP has to grow at 9-10 per cent for the next 30 years, then it cannot be without bringing revolution in the agri sector,” Kant said.

He also emphasised on eliminating middlemen in marketing of farm produces to boost farmers’ income.

Kant expressed confidence that farmer income will be doubled by 2022. He said there is a need to spread good agriculture practice and success stories of farmers across the country.

“The second revolution in agriculture will come from technology and marketing,” Kant said.

Pawan Goenka, Managing Director, Mahindra & Mahindra Ltd,, said: “The contribution made by our farming community is a manifestation of this new age of farming which we celebrate through our annual awards”.

As part of Mahindra Agri Village (MAV) programme, he said the company has worked closely with more than 50 villages.

Mahindra Samriddhi Krishi Shiromani Samman (Lifetime Achievement Award) 2019 was conferred upon E A Siddiq for his immense contribution to Indian agriculture. The award was handed over to recognise his contribution of enhancing productivity of paddy (Both Basmati & Non Basmati).

Mukesh Ambani bails out Anil in Ericsson payout case day before SC deadline

Mumbai: Billionaire Mukesh Ambani stepped in to bail out younger brother Anil Ambani by helping him repay Reliance Communications’ (RCom’s) dues to Ericsson. The last-minute rescue spares the younger Ambani a three-month jail term for contempt of court.

RCom cleared the entire dues to Ericsson India to purge the contempt of a Supreme Court order. The debt-ridden company had already paid Rs 118 crore of the Rs 550-crore dues. In addition, the company had paid around Rs 3 crore in penalties to Ericsson.

“My sincere and heartfelt thanks to my respected elder brother, Mukesh, and Nita for standing by me during these trying times and demonstrating the importance of staying true to our strong family values by extending this timely support,” said Anil Ambani in a media statement. RCom had time until Tuesday to make the payment, failing which Anil Ambani, its chairman, would have had to serve a three-month jail term, according to the court’s order.

New Delhi : Investigation has been initiated against e-commerce giants Amazon and Flipkart for alleged violation of foreign exchange law, the Enforcement Directorate (ED) Monday informed the Delhi High Court.

A bench of Chief Justice Rajendra Menon and Justice A J Bhambhani noted the submissions of the ED that a case has been registered under provisions of the Foreign Exchange Management Act (FEMA) against the two companies and disposed of a PIL which has alleged that the e-commerce giants were violating foreign direct investment (FDI) norms.

The court had earlier sought response of the central government, Amazon and Flipkart to the plea which has sought a probe into the alleged FDI violations.

The ED, in its reply filed through central government standing counsel Amit Mahajan, has said the “department has already registered and initiated investigation under the provisions of FEMA against the two companies to ascertain whether they have been contravening any provisions of FEMA or contravening any rule, regulations, notification, direction or order issued in exercise of the powers under FEMA….” The agency also sought dismissal of the petition.

The petition by an NGO, Telecom Watchdog, also asked for initiation of legal proceedings against the two e-commerce companies under the FEMA for alleged violation and circumvention of FDI norms.

The plea, filed through advocate Pranav Sachdeva, has claimed that Amazon and Flipkart have created multiple entities to circumvent the FDI norms and route the hot-selling stock at cheaper rates.

The petition has contended that according to Press Note 3 of 2016, which regulates FDI in e-commerce, entities like Amazon and Flipkart are not to exercise ownership over stock, nor directly or indirectly influence price of goods and services sold on their marketplace.

It claimed that by creating name lending companies, Amazon and Flipkart buy branded goods in bulk at discounts from manufacturers and render small sellers uncompetitive by a wide margin, thus influencing the prices in violation of the FDI norms.

“As a consequence of this FDI norms violation, smaller sellers are unable to participate in the fast growing e-commerce sector,” the plea has contended, adding that due to subsidised prices on such platforms, small sellers are unable to sell in the brick-n-mortar world too.

Besides, the plea has also claimed that the two e-commerce firms have created several other group companies in the chain to divide discounts and losses.

“Exchange offers, EMI costs and bank offers are funded completely or substantially by Amazon and Flipkart and constitute a clear influence on price in violation of FDI norms,” it has alleged.

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